Partner News

Calculating Overtime Payments in China

Feb. 15 – Doling out overtime payments can be expensive for employers. With regards to paying overtime in China, employees are grouped into three categories working under different systems – the standard work hour system, the comprehensive work hour system, and the non-fixed work hour system.

The standard work hour system requires that an employee’s normal working day should not exceed eight hours, that the normal working week not exceed 40 hours, and that each employee should be guaranteed at least one rest day. Most white-collar workers in China now operate under a five-day working week, although some domestic companies still utilize a six-day working week model.

The comprehensive work hour system does not refer to one week as the key factor in regulating working hours. Instead it takes a set period (typically one month) as the base to calculate the number of working hours. Although the distribution of hours worked during this period may be quite irregular, the average number of working hours per day and per week should roughly correspond to the levels set out in the standard work hour system. Please note that before a company can implement this system it must submit its plan to the local labor bureau and receive approval. This system is normally used for blue-collar workers or other workers that require irregular shifts.

Under the non-fixed work hour system employees do not generally receive overtime payments because measurement of the time spent working is considered to be impractical. A company implementing this system for some of their employees should receive prior approval from the local labor bureau.

Let’s take a look at how overtime is calculated for the two types of workers eligible to receive it:

Overtime under the standard work hour system

Overtime for office workers with set working hours each weekday is calculated as follows:

Extra hours worked on weekdays: 150 percent of basic hourly salary

Hours worked on weekends: 200 percent of basic hourly salary

Hours worked on public holidays: 300 percent of basic hourly salary

The basic hourly salary is calculated by taking the basic monthly pay of the employee and dividing it by 174 (average number of working hours in the month).

These are the mandatory minimum percentages paid to employees for the overtime they work, although some companies offer their employees higher rates than the statutory minimums.

Extra hours worked on public holidays: 300 percent of basic hourly salary

There are also some restrictions on the amount of overtime an employer may ask an employee to do:

A maximum of three hours in any one weekday

A maximum of 36 hours in any one month

Assuming a company stipulates an eight hour work day, then on average in a month a worker shall work 174 hours. Adding this maximum 36 hour period of overtime means that (for an average-length month) an employer cannot legally require an employee to work for more than 210 hours during that month.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore, and Vietnam. For further information or clarification on China’s social insurance or HR policies, please email china@dezshira.com.

Related Reading

China’s Social Insurance LawA summary of some of the key points in the newly implemented Social Insurance Law, which covers a great deal more than just incorporating foreigners into the system. We explain the costs and benefits of participation by foreign employees to both companies and individuals as well as take a look at some of the trends across the country relating to the implementation of the law.

Human Resources in ChinaSpecifically designed to cover the most important issues relating to managing a Chinese workforce, this guide details the HR issues that both local managers in China and investors looking to establish a presence on the mainland should be aware about.

Dear Sir
do you have information, channel about the way to obtain China government’s approval for irregular working hours arrangement or comprehensive working hours scheme ?
what elements shall be presented , in which form and to who ?
best regards
Philippe

Qualification: Employers who cannot carry out the standard 8 hours/day and 40 hours/week work schedule due to the special characteristics of their production and operation and unique nature of the work involved can implement irregular or comprehensive working hour systems upon application and approval.

The comprehensive working hours system applies to personnel engaging in the following types of work or job posts:
1) Continuous work is required due to nature of the work;
2) The production or operation is constrained by season or other natural conditions;
3) Due to the influence of external factors, the production task is uneven;
4) The employee lives far away from his/her work location, and therefore adopts prolonged and concentrated periods of work and rest;
5) Work shift system is implemented; or
6) Concentrated periods of rest or vacation can be arranged regularly.
The irregular working hours system applies to personnel engaging in the following types of work or job posts:

1) Field personnel and sales personnel;
2) Long distance transportation personnel;
3) Personnel stationed overseas on a long-term basis;
4) Shift personnel that do not engage in production; or
5) Other personnel in special work posts who are entitled to freely decide on their work and rest hours.

No approval will be granted where the irregular working hours system is implemented for upper management personnel in an enterprise.

Application materials:
1) Application form;
2) Enterprise Legal Person Business License (duplicate and photocopy);
3) Description letter (describing the reasons for the enterprise’s inability to implement the standard working hours system; the job posts involved, the number of personnel and details about the comprehensive working hours system to be implemented);
4) Opinion from the enterprise’s labor union regarding the implementation of the special working hours system (if no labor union has been established, then an opinion jointly signed by the personnel involved in the special working hours system shall be submitted);
5) Other materials of proof (power of attorney, photocopy of the agent’s identification certification, etc.).

Hope that helps! Let us know if you require further assistance.
Best regards;
Chris

Firstly, for the Comprehensive System, is it possible for the “set period” to be longer than one month – for example, 3 months/a quarter?

Secondly for the irregular working hours system, does the approval process require different/additional steps from the comprehensive system approval process? Related, is there any maximum number of hours an employee can work under the irregular hour system ?

@HR Manager – Regarding the comprehensive system, the “set period” can be weekly, monthly, quarterly or annually. However, the average number of work hours per day and per week should be the same as the legal standard number of work hours.

Regarding the irregular working hours system, the types of staff eligible for the comprehensive system and the irregular working hours system, respectively, are different, but the approval process and application materials required should generally be the same, subject to the specific requirements of the local labour bureau. The employee should work no more than 8 hours a day, and no more than 40 hours a week.